Slowdown, take it easy. While many were focused on what some are calling a manufactured crisis on the debt in Washington, the truth is we should be focused on the stumbling U.S. economy and the anemic growth that may infect the world. The U.S. slow growth and weaker-than-expected China manufacturing data is increasing the odds for a third round of quantitative easing and the odds that Chinese steps to slow their economy may be coming to an end. Both of these factors are bullish for commodities.
The U.S. economy may already be in recession as the GDP rose at a 1.3% annual rate and what makes things worse is that the prior quarter posts following a 0.4% negligible gain. Add to that the fact that HSBC is slashing 30,000 jobs which is another factor that could force the Fed to act. In China the purchasing managers index (PMI) fell to 50.7 from 50.9 the previous month according to the China Federation of Logistics and Purchasing. They also said that the figures showed, "economic development is trending towards a stabilization" a sign that further steps to tighten economic policy to slow the economy may be coming to an end, which is another reason to buy commodities.
The markets seem to like the fact that the deal was cut in Washington. Reports say that the agreement would cut at least $2.2 trillion from federal spending over a decade. Yet only 1 trillion has been agreed to and the creation of a special committee to find further savings. The deal must still pass votes in Congress that should happen sometime today. Of course it is a far cry from what needs to be done. Still it is a step in the right direction. The debate is now on the table and will be the major issue in the next election. The Tea Party is making headway in restoring fiscal sanity in Washington.
Oil is rising hard on the fact that China may stop raising rates.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org.